Analysis. Rafael Correa tried to regulate tax havens, passing laws to regulate capital flight. The surprise result of Sunday’s election may destroy that progress.

Lasso’s victory in Ecuador is a victory for tax havens

He wants to stop the advance of the left, stop indigenous people and demands for indigenous rights, stop everything. On his third run for president of Ecuador, this time victorious, conservative banker Guillermo Lasso will also stop something else: global tax reform. A detail that will affect the citizens of the world, as well as those of his country.

Since 2016, small, poor and politically knotty Ecuador has been leading a global campaign against tax havens, which have sucked the lifeblood from it and every other country in the world (and the poorer a country is, the more “tax vampirism” affects it). Those were the days of the Panama Papers—does anyone remember those, that mountain of revelations about the trillions pumped into Tortuga, the major banking hub?

Then-Ecuadorian president Rafael Correa passed laws against capital flight and made Ecuador the only country on the planet where a referendum was won that made it illegal for anyone holding or running for public office to own interests in tax havens. This intercepted millions of fleeing dollars—for many years, the dollar has been the country’s currency instead of the derelict sucre—and put them into development and anti-poverty policies.

And yes, certainly, it also put them in ambitious and environmentally-unfriendly extractivist policies, thanks to which Correa damaged himself irreparably in the eyes of the big indigenous organizations—which is the main reason why more or less seven million leftist (technocratic or pro-indigenous) voters got defeated by 4.6 million conservative and pro-business voters. But that’s another story. After the 2017 anti-tax haven referendum, a few wealthy Ecuadorians faced a dilemma: to continue to own lucrative assets in the Isle of Man, Delaware and other light-tax places, or to run for office in Ecuador. Among them was also Guillermo Lasso—lo and behold, the man who won the election on Sunday. The poor soul owned a bank in Panama (not a bank account, but an actual bank, Banisi) and a number of properties in Florida.

So, at the same time that Rafael Correa was putting himself at the head of a UN campaign aimed at reforming the world’s tax system, Guillermo Lasso was putting the names of his children, grandchildren and various front persons at the head of his vast empire, eliminating any trace of his own to avoid the prohibition against running. The banker had already run two presidential campaigns, which ended in failure. He would not lose the third one.

Lasso and his family did nothing but follow the model of the country they saw as a leading light, the U.S. The great American rich pay the same taxes today as they did in the 1920s (The Triumph of Injustice, Emmanuel Saez and Gabriel Zucman, 2019). Those in Ecuador do the same. As do those in Italy and everywhere else.

Correa’s Ecuadorian proposal was developed within the G77, an intergovernmental organization that now includes 134 countries, all from the global South (in 1964, there were 77 founding nations, hence the name), but it aimed to go beyond state borders. It proposed creating the usual panel of experts, but also a rather unusual panel of tax experts to put at the disposal of the states, global accountants to be unleashed against the rules and tricks of tax-avoiding lawyers from all over the world—like number-crunching Agents 007. And it included measures against tax competition between states—like in the case of the Big Tech companies that earn billions from users in Italy and pay peanuts to the tax authorities in Ireland.

Correa ended his mandate on a high note, but last year, an 8-year prison sentence for corruption (on doubtful evidence, to say the least) made him flee to Brussels, where he still resides, claiming his innocence. Among the technocrats who helped him write the anti-capital flight laws, there was a young and promising researcher, not even thirty years old, named Andrés Arauz. He would be the loyal Correaist candidate who was defeated on Sunday by the banker Lasso. Arauz had worked, among other places, at the prestigious Centre for Economic Policy Research (CEPR) in Washington, which counts among its leaders Mark Weisbrot—economist and columnist for The Guardian and The Nation—and among its regular contributors Joseph Stieglitz. The CEPR has investigated Lasso’s properties and discovered a treasure trove: 136 properties in Florida worth 64 million dollars, some bought in cash.

A mansion bought for $1.5 million in cash? A feat that would make Pablo Escobar jealous. They are all hidden within a nest of shell companies like Russian dolls, with names as funny as the ones Berlusconi used to pick when he was young (Nora Investment Cinco, Nora Investment Seis, and then Siete, Ocho and Nueve, etc.). This is precisely what the Ecuadorian anti-tax haven laws were fighting against. Yet, it was covered with the most scrupulous silence by the Ecuadorian media.

How much would you be willing to bet that Sunday was the day when the proposal for a fair worldwide taxation system and against tax havens died as well?

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